Singtel CEO’s Salary Halved As Profit Falls – Cites Stiffer Competition Across Markets


It was reported that Singtel CEO Chua Sock Koong’s salary had been cut by almost half, from an annual salary of $6.1 million in 2018 to $3.5 million, inclusive of bonus and benefits.

This was revealed when the firm released an annual report on Wednesday (26 June) along with the company’s plans to monetise some of its “loss-making” digital businesses.

The underlying net profit for the 12 months, excluding one-time events, dropped by 21.4% year-on-year to $2.83 billion.

After the annual report was released, Singtel’s shares closed at $3.50 on its cum-dividend date on Wednesday.

Chua was quoted as saying that this was “far from business as usual”.

She noted that competition escalated across all their markets as operators fought for market share while the telecommunications industry was getting disrupted by new technology.

This increased pressure on prices and return on investment, she added, describing the environment as one of the “tougher industry and business conditions”.

Cybersecurity business Trustwave, as well as digital marketing units Amobee and Videology, which are part of the digital life division, were highlighted.

Simon Israel, Chairman of the Singtel Board, said, “Part of our digital transformation involved making calculated investments in new businesses that would thrive in the future economy.”

“Your board is aware that the value of these investments is not being recognised in our share price and management intends to unlock this value at the appropriate time.”

The telco’s cybersecurity business garnered a loss of $102 million before interest and tax for the 12 months to 31 March, while operating revenue increased 4.1% to $549 million.

On the whole, the digital life division was reported to be in the red.

Despite revenue increasing 11.9% to $1.2 billion, advertising agency Amobee, including the newly-acquired Videology, had a pre-tax loss of $42 million.

Samba Natarajan, CEO of Group Digital Life, said they are turning their focus “towards value realisation” for units like Amobee and video streaming platform Hooq by having strategic partners coming on board as stakeholders, or through an initial public offering.

“We also look to better inform the investment community on the real value of these businesses, as they are quite different from our traditional core businesses and should be valued with metrics appropriate for their respective industries.”

Besides acquisitions and organic growth, Natarajan added that Singtel is looking to utilise its venture capital fund, Innov8, to drive the development of its digital business.

They will take stakes in emerging companies, “especially those that are filling the gaps left by traditional infrastructure or are disrupting and improving service delivery through their digital solutions”.

He believes that these companies will create value for their customers, and they can leverage on their presence to “scale their business and expand in the region”.

We can’t determine for sure the reason(s) behind the losses contributed by Singtel’s digital units, but a report in February 2019 stated that by December 2018, the telco’s data and internet revenues (its consumer-focused businesses) dropped from S$2.6 billion to S$2.47 billion.

Singtel isn’t the only one feeling the heat from the competition as competitor Starhub also cited “inevitable pressures from intense local competition” as one of the reasons for its retrenchment exercise in October 2018.

This could be due to the entrance of mobile virtual network operators (MVNOs) in Singapore, all of whom have tried to win over consumers with low prices and generous data allowances.

But the presence of MVNOs are not the root cause.

Stiffer Competition Among Other Factors

circles life youtiao666
Image Credit: Youtiao666

When Circles.Life, the first MVNO in Singapore, pulled a daring publicity stunt in March 2017, it was refreshing and exciting.

It made everyone sit up.

At that time, offering 20GB for only $20 seemed like a deal that was too good to be true because we were all so used to getting 4GB mobile data plans – for $60/month, no less.

But once the initial scepticism blew over and people started terminating their long-time mobile contracts to jump ship, other MVNOs saw the opportunity to move in to this new market.

Zero SG launched with a $45 plan for 6GB targeted at traditional telco plans, then followed up with a ‘1GB for $1 a day’ plan that could be seen as a one-up against Circles.Life.

The third MVNO to launch in Singapore was Zero1, and it offered an unlimited data plan that costs “one-third the current market price”.

At that time, Singtel hit back with the launch of the Data X Infinity plan, Starhub promoted its weekend unlimited data plan, and M1 touted its mySIM3 98 plan.

A quick Google search found that M1 has since retired its hefty $98 plan, while Singtel’s plan has been shaved down to just $29.90/month from its initial price of $39.90/month.

In essence, traditional telcos introduced even more expensive mobile data plans as a response to new competitors.

If they thought their moves were better than the new kids on the block, they were wrong.

The strategy may have not sat well with consumers but this is just one of the reasons we’ve observed that could have contributed to the decline in profits of the telco.

In the Chairman’s message, Israel said he had predicted escalating competition across the region as operators aggressively vie for market share.

“In India, we have seen an unprecedented situation, where a new entrant investing more than US$40 billion, has waged a price war, driving the industry into losses.”

He had described the 2019 financial year as “somewhat of a ‘perfect storm’ with intensifying competition across all markets, particularly India and Indonesia”.

Chua noted in her GCEO Review that the company’s financial results were “affected by carriage pricing erosion in the enterprise segment and challenging conditions in India and Indonesia”.

Modern Day Problems Require Modern Solutions

If you can’t beat them, join them.

Since attempts to win back customers who switched over to MVNOs fell flat, traditional telcos now take a different – or rather, a similar – approach.

In May this year, during an earnings briefing, Yuen Kuan Moon, CEO of Singtel’s consumer business, argued that “it’s not just purely looking at data plans”, when asked about the SIM-only and unlimited data offerings in the market.

singtel gomo
Image Credit: Singtel

He highlighted Singtel’s various mobile consumer products that cater to different types of customers, like the HBO pay-television packages and their diverse mobile contract plans from Combo XO to the latest millennial-centric GOMO.

GOMO’s tie-up with Amazon Prime, coupled with its low price, high mobile data package also throws in lifestyle perks such as dining offers, sends a clear message to the MVNOs here.

“Moreover, if you look at some of the bundled plans, we are not only just offering a large data bundle, but we are also offering it with content,” he reasoned.

“So, from a service perspective, we do not just follow the market trend by just offering cheap data plans and unlimited data plans, because that’s probably only one segment of the market.”

Before MVNOs came along, Singtel was comfortable as the leader amongst the three telcos in Singapore.

Competition back then focused on who could give a better product offering and who could convert competitors’ customers into their own – much like Uber and Grab when they were the only providers in the market.

Perhaps it’s not about offering more choices but rather listening to market needs and anticipating changes.

starhub giga
Image Credit: Hardware Zone

Even though we think it’s just a little too late, it’s worth noting that traditional telcos are starting to listen with the likes of GOMO, Starhub’s Giga!, and M1’s overhauled ‘$25 for 30GB’ base plan.

However, it remains to be seen whether consumers are convinced.

As their digital businesses span across all their business segments and include services such as ICT, digital marketing, and digital content, among others, factors affecting their overall results are the same factors affecting their digital businesses.

Hence, as mentioned earlier in the article, the company has made plans to monetise those digital businesses.

Chua also addressed the telco’s plans to move into laying the groundwork for the 5G network in Singapore, so that’s another core business they’ll be focusing on in the near future.

“The competitive landscapes in our core markets of Singapore and Australia have changed with more players, including MVNOs, in the industry coupled with increasing capital intensity with 5G rollout expectations,” she said.

“While 5G spectrum policy is still being finalised in Singapore, we are piloting the island’s first 5G network.”

*Editor’s note: We’ve updated the article to rectify the inaccuracies in the previous version of this article, and amended the title to better reflect the story.

Featured Image Credit: Echo Chamber

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Vulcan Post aims to be the knowledge hub of Singapore and Malaysia.

© 2021 GRVTY Media Pte. Ltd.
(UEN 201431998C.)